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Since budget talks took off a few weeks ago, concerns over the sustainability of Italy’s public finances have risen. Italian government bonds yields are up and bank shares are down. Bond yield volatility is here to stay for the rest of the year.

Abe and his LDP-Komeito coalition were victorious at yesterday’s lower house elections. The disappointing election result for the opposition side is not surprising when one takes into account the short amount of time for a structured election campaign.

Greece needs money to repay creditors in July. Debt relief is the main outstanding issue retarding the transfer of funds from creditors to Athens. We believe Greece will receive funds in time to prevent a default, but question debt sustainability.

Macron won the French presidency on Sunday. Markets apparently fully priced in his victory. Much of his economic success now depends on his new party’s performance in the June parliamentary elections. There are three main scenarios for government formation.

The first round election outcome is in line with expectations. Markets sigh in relief. Emmanuel Macron is now favourite to become the next French president. In the medium term risk of political gridlock is significant.

The French elections are no done deal; while Macron seems to be ahead, Le Pen has a chance to win the presidency. All candidates have varying economic proposals to make France great again. Taking France out of the EU will be difficult for Le Pen.